InProcessOut, LLC v. World Tech Toys, Inc.

Western District of Texas, txwd-5:2018-cv-00869

ADVISORY TO THE COURT by InProcessOut, LLC. (Langley, H.)

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The Law Firm of 3 H. Dale Langley, Jr. A Professional Corporation 1803 West Avenue Telephone: (512) 477-3830 Austin, Texas 78701 Fax: (512) 597-4775 Via Email and Regular Mail Email: October 4, 2019 Honorable Henry J. Bemporad United States Magistrate Judge U.S. District Court, W.D. Tex. (San Antonio) 655 E. Cesar E. Chavez Blvd. San Antonio, Texas 78206 Re: InProcessOut, LLC v. World Tech Toys, Inc., Cause No.5:18-cv-00869-FB In the Western District of Texas - San Antonio Division Docket No. 42500-0101 To the Honorable Judge Bemporad: I represent the Plaintiff, InProcessOut, LLC, in the foregoing case and am writing to assure satisfaction of my ethical duties by reporting a recent decision of another court of this District that may have some relevance to the present case. Counsel for Plaintiff here is also counsel for a plaintiff, Getagadget, Inc., in a case before Judge Albright of the Waco Division of this District. In the Waco case, Getagadget sought to avoid a defendant's motion to dismiss for lack of personal jurisdiction. As summary of the factual background in the Waco case, Getagadget's counsel purchased from two online retailers (Walmart and Amazon) certain products of the defendant in that case which allegedly infringe Getagadget's trademark. Getagadget plead personal jurisdiction of that defendant based on the two sales in the Western District. Under those facts, the Waco court granted the motion to dismiss for lack of personal jurisdiction. Getagadget is appealing the Waco decision, however, I believe this Court would want to know of that decision. The facts in the present case before this Court appear somewhat different from those in the Waco case. The Defendant, World Tech Toys, Inc., in the present case previously moved for dismissal for lack of personal jurisdiction, but the Court, Judge Biery presiding, ruled moot that motion for dismissal. WTT thereafter filed its answer in the present case and did not assert lack of personal jurisdiction. InProcessOut plead personal jurisdiction of WTT because of purchases over the Internet by InProcessOut's counsel of allegedly infringing products of WTT. Counsel purchased the allegedly infringing products from Amazon. The products were delivered to counsel in Texas to complete the sale. WTT's principal previously testified that at least about 0.5% to 1.0% of WTT's sales of the allegedly infringing products are made to Texas residents (See, e.g., [Dkt. 20] Declaration of Vicken Kouyoumijan in Support of Defendant World Tech Toys, Inc.'s Motion, ¶ 44). In any event, WTT did not re-assert lack of personal jurisdiction in its answer. Honorable Henry J. Bemporad United States Magistrate Judge Page 2 The factual differences between this present case and the Waco case appear significant. Nevertheless, I wish to make this Court aware of the Waco decision in order to assess whether it has any relevance. Sincerely, H. Dale Langley, Jr. Enc.: Order dated September 30, 2019 [Dkt. 12], in Case No. 6:19-cv-00330-ADA, in the U.S. District Court, Western District of Texas (Waco Division) CERTIFICATE OF SERVICE I hereby certify that on October 4, 2019, I electronically filed the foregoing with the Clerk of the Court using the CMF/ECF system, which sent notification of such filing to all counsel of record in this matter. /s/ H. Dale Langley, Jr._______________________ H. Dale Langley, Jr. 2 Case 6:19-cv-00330-ADA 5:18-cv-00869-HJB Document 62 12 Filed 10/04/19 09/30/19 Page 31 of 86 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION GETAGADGET, LLC, § Plaintiff § § v. § CIVIL NO. 06:19-CV-00330-ADA § JET CREATIONS INC., § Defendant. § § ORDER GRANTING DEFENDANT'S MOTION TO DISMISS Before the Court is Defendant Jet Creations Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction, for Improper Venue, and Pursuant to Federal Rule 12(b)(6). ECF No. 7. Defendant originally filed the Motion to Dismiss on July 26, 2019. Id. Plaintiff Getagadget, LLC filed its Response on August 7, 2019. Pl.'s Resp. to Def.'s Mot., ECF No. 11. After reviewing the Parties' pleadings and the applicable case law, the Court finds that Jet Creation Inc.'s Motion to Dismiss should be GRANTED. BACKGROUND Plaintiff, Getagadget, LLC, is a Texas Limited Liability Company with its principal place of business in Austin, Texas. P1. 's Compl. at ¶ 1, ECF No. 1. Defendant, Jet Creations, Inc., is a Virginia Corporation with its principal place of business in Alexandria, Virginia. Pl.'s Compl. at ¶ 2. Plaintiff alleges trademark infringement, unfair competition, and trade dress infringement under Texas and Federal law. Pl.'s Compl. at ¶J 4-5. In response to Plaintiff's allegations, Defendant challenges personal jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil Procedure. Def.'s Mot. to Dismiss. Defendant contends that the factual allegations within Plaintiffs complaint are insufficient to show that Defendant has the requisite "minimum contacts" with the state of Texas. Def. '5 Mot. to Dismiss 1 Case 6:19-cv-00330-ADA 5:18-cv-00869-HJB Document 62 12 Filed 10/04/19 09/30/19 Page 42 of 86 ¶ 12. Plaintiff argues that personal jurisdiction exists because Defendant sells products, through its website and other online retailers, to residents of the State of Texas. P1.'s Compl. at ¶J 12-13. Supporting this allegation, Plaintiff offers evidence of two sales in Texas. Plaintiff's attorney purchased one of Defendant's products through Amazon at and received the product at an address in this District. Pl.'s Resp. to Def.'s Mot. at ¶ 6. Plaintiff's attorney also purchased one of Defendant's products through Walmart at and picked up the product from a retail store in this District. Pl.'s Resp. to Def.'s Mot. at ¶ 7. LEGAL STANDARD On a motion to dismiss, the burden of establishing personal jurisdiction rests with the plaintiff. Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982). The plaintiff need only make a prima facie showing of personal jurisdiction to survive a motion to dismiss. Id. Courts resolve factual conflicts in favor of the plaintiff. Id. The United States Constitution limits the exercise of personal jurisdiction. Due process requires a nonresident defendant "have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Personal jurisdiction may be general or specific. Courts may exercise specific personal jurisdiction "[w]hen a controversy is related to or 'arises out of' a defendant's contacts with the forum." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). Importantly, "[t]he unilateral activity of [a plaintiff] who claim[s] some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State." Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 222 (5th Cir. 2012) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). 2 Case 6:19-cv-00330-ADA 5:18-cv-00869-HJB Document 62 12 Filed 10/04/19 09/30/19 Page 53 of 86 In deciding whether the exercise of specific personal jurisdiction comports with due process, The Fifth Circuit analyzes three factors: "(1) whether the defendant. . . purposely directed its activities toward the forum state or purposely availed itself of the privileges of conducting activities there; (2) whether the plaintiffs cause of action arises out of or results from the defendant's forum-related contacts; and (3) whether the exercise of personal jurisdiction is fair and reasonable." Luv N' care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006). "If the plaintiff successfully satisfies the first two prongs, the burden shifts to the defendant to defeat jurisdiction by showing that its exercise would be unfair or unreasonable." Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271(5th Cir.2006). ANALYSIS Plaintiff argues that this Court has personal jurisdiction over Defendant because Defendant purposefully avails itself of the privileges of doing business in the State of Texas by selling its products online, directly and through intermediaries, to customers in this District. P1.' s Compi. at ¶J 12-13. Defendant contends that Plaintiff fails to meet its burden of proof because Plaintiff does not provide factual support for the Complaint allegations. Def.'s Mot. at ¶ 12. When the defendant's contacts with the forum are based on the defendant's online presence, courts look to the "nature and quality of commercial activity that an entity conducts over the Internet." Zippo Mfg. Co. v. Zippo Dot Corn, Inc., 952 F. Supp. 1119, 1124 (W.D.Pa. 1997). The court in Zippo promulgated a "sliding scale" approach to the minimum contacts analysis that "categorized Internet use into a spectrum of three areas." Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir.1999). The Fifth Circuit adopted this sliding scale approach in the general personal jurisdiction context. Id. Since Mink, a number of Texas District Courts have interpreted the Fifth Circuit's adoption of the Zippo test as applying to specific 3 Case 6:19-cv-00330-ADA 5:18-cv-00869-HJB Document 62 12 Filed 10/04/19 09/30/19 Page 64 of 86 jurisdiction as well. See Am. Eyewear, Inc. v. Peeper's Sunglasses & Accessories, Inc. peepers, 106 F. Supp. 2d 895 (N.D. Tex. 2000). See also Kelly Law Firm, P.C. v. An Attorney for You, 679 F. Supp. 2d 755 (S.D. Tex. 2009). District courts within the Fifth Circuit have found a variety of commercial websites constituting sufficient contacts to subject nonresident defendants to personal jurisdiction. See 721 Bourbon, Inc. v. House of Auth, LLC, 140 F. Supp. 3d 586, 594 (E.D. La. 2015) (collecting cases). However, "personal jurisdiction cannot rest on internet-based exchanges that are possible in theory but have yet to materialize." Id. at 595. Rather, the plaintiff must provide evidence of an actual "relationship among the defendant, the forum, and the litigation." Id. (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)). In Origin Instruments Corp. v. Adaptive Computer Sys., Inc., the court held that operation of an interactive website alone is insufficient to establish personal jurisdiction. No. CIV.A. 397CV2595-L, 1999 WL 76794 (N.D. Tex. Feb. 3, 1999). The court required "something more" to show that the defendant purposefully availed itself of the benefits of the forum state Id. at *4 Personal Jurisdiction must be based on more than "the mere possibility that a Defendant may be able to do business with Texans over its web site." Id. Texas courts have exercised personal jurisdiction where a plaintiff offers evidence of actual sales to the forum along with evidence of an interactive website. See Tempur-Pedic Int'l, Inc. v. Go Satellite Inc., 758 F. Supp. 2d 366 (N.D. Tex. 2010). "Moreover, as the Supreme Court has made clear, the relationship required for specific personal jurisdiction must arise out of contacts that the defendant himself creates with the forum State." 721 Bourbon, Inc. 140 F. Supp. 3d at 595 (internal citations omitted). A transaction initiated by the plaintiff is insufficient to establish personal jurisdiction. Id. See QR Spex, Inc. v. 4 Case 6:19-cv-00330-ADA 5:18-cv-00869-HJB Document 62 12 Filed 10/04/19 09/30/19 Page 75 of 86 Motorola, Inc., 507 F. Supp. 2d 650, 661 (E.D.Tex.2007) (holding that purchases made by a private investigator hired by the plaintiff constituted "unilateral acts" of the plaintiff insufficient to establish personal jurisdiction). In Tempur-Pedic, the court found that personal jurisdiction existed based on three sales of infringing products through the defendant's website to residents in Texas. Tempur-Pedic, 758 F. Supp. 2d 366. The defendant in that case argued that the court lacked personal jurisdiction because "at least one, and as many as three," alleged sales to Texas residents resulted from the unilateral acts of the plaintiffs personal investigator. Id. at 374. The District Court acknowledged that such unilateral acts are insufficient to establish personal jurisdiction. Id. Nonetheless, the court held that personal jurisdiction existed based on evidence of sales to Texas residents that were not orchestrated by the plaintiff Id. at 375 (emphasis added). Here, Plaintiff alleges personal jurisdiction based on two sales within this District to Plaintiff's attorney. P1.' s Resp. to Def 's Mot. at ¶IJ 6-7. Plaintiff fails to provide any other evidence supporting its claim that Defendant has actually, purposefully availed itself of the privileges of doing business in the State of Texas. Plaintiffs only evidence constitutes its own unilateral act of bringing Defendant's product into the forum. Without more, this evidence is insufficient to prove Defendant's "minimum contacts" with the forum. Plaintiff attempts to manufacture evidence of personal jurisdiction in this District by ordering products online and bringing them into the District. While Plaintiff may have shown that it is possible to obtain Defendant's products in Texas, Plaintiff failed to show that any consumer, excluding itself, has done so. Thus, Plaintiff failed to meet its burden and make a prima facie showing of personal jurisdiction. Therefore, Defendant's motion to dismiss for lack of personal jurisdiction is GRANTED. Case 6:19-cv-00330-ADA 5:18-cv-00869-HJB Document 62 12 Filed 10/04/19 09/30/19 Page 86 of 86 CONCLUSION Because of the reasons stated above, the Court hereby GRANTS Defendant's Motion to Dismiss for lack of personal jurisdiction. Because the personal jurisdiction issue is dispositive in this case, the court does not address Defendant's other theories of dismissal. SIGNED this 30th day of September 2019. ALAN D ALBRIGHT UNITED STATES DISTRICT JUDGE